The narrative we create in our minds isn’t always accurate. Look at the financial media’s recent coverage of the NASDAQ’s performance. “The intense sell-off” has been a daily breaking news headline.
The top 5 weightings in the NASDAQ 100 are Apple, Microsoft, Amazon, Tesla, and Google. These five companies make up roughly 40% of the index. The chart below shows what percent they are off their high in 2021.
The following chart shows the same five companies’ performance over the last 12-months.
If you focus on the first chart or the media’s headlines, the narrative can seem pretty bleak and lead you to make decisions you otherwise wouldn’t. It feels like a textbook example of ‘can’t see the forest for the trees.’
If you zoom out and gain perspective, being down 26% year-to-date (YTD) in Tesla isn’t a story because you’re up 338% over the last 12-months. The other four companies are down 4-14% YTD and ‘only’ up 40-70% in the previous year. Zoom out even further, and the current headlines are even more immaterial.
Be wary of buying or selling the headlines or only using a fraction of the truth to create your narrative.